Abstract

The Leading Economic Indicator is a composite index derived by getting the linear combination of eleven economic time series whose behavior generally precede expansion or contraction of overall economic activity. The study recommended changes in the current LEIS. A database of potential indicator series was constructed and is suggested to be maintained. This database shall serve as a source of indicator series for consideration when the leading economic indicator series is evaluated. The research focused on the improvement in seasonal adjustment, detrending, other data transformations such as standardization, construction of the composite indicator, extrapolation procedures to deal with untimely releases of indicators series values, and analyses. The changes suggested are: use of TRAMO-SEATS instead of X11ARIMA in seasonal adjustment, use of Hodrick-Prescott filter instead of trend models for detrending, standardization of cycles before computation of the composite indicator. Change in the weights of the equation to compute for the composite indicator was suggested. The institution of a monthly leading indicator is also suggested at the next exercise since monthly reference series is available and monthly data of the reference series currently used are also maintained by the National Statistical Coordination Board.